I want to share with you what we are focusing on as both an Assemblyman and as Chairman of the Legislative Advocacy Committee for the Real Chamber of Commerce. First and foremost, I want to be your “eyes and ears” in Carson City. I will be your advocate, protecting your investments and businesses from burdensome taxes and regulations that stifle economic growth. Nevada has much to offer new businesses. In fact, many years ago, I relocated to Nevada because of those opportunities.
I will be focusing on both taxes and regulations, both of which are needed, but both that should fully support a strong, vibrant economy for the great state of Nevada. Recent events in past sessions, have not always supported that vision. During the 2017 Session in Carson City, I will provide you updates on any and all Legislation that, in any way, impacts Nevada businesses. I will send out updates and if action is needed, I will let you know.
Part of my motivation is because, like you, I own my own business. Like you, I support reasonable state government services needed to help Nevada. But, not everything passed by the Legislature, is not always in your, and mine, best interests. Let me give you a quick snapshot of what came out of the 2015 Session alone, that has a significant, and negative impact on you and your business.
Commerce Tax: This is a brand new tax assessed on the gross receipts of all business revenues in excess of $4 million, with no deductions for expenses. Passive entities, nonprofits, real estate trusts and certain other entities are exempt, but all others are grouped together according to their code in the North American Industrial Classification System and assessed at a unique rate assigned by industry. Those rates are listed on the following page and assuredly will increase within 2 years.
The assessment is purportedly only on revenue that results from economic activities or transactions that occur within the state’s borders, including the shipment of any goods from out of state to a Nevada address. Business owners will need to apportion all such revenues before filing a commerce tax return. In addition, any pass-through revenues are exempted from the tax. Pass-through revenues are defined as “Revenue received by a business entity that is required by law or fiduciary duty to be distributed to another person or governmental entity. If your accounting books are kept at a corporate headquarters outside the state, you may also be required to pay all travel expenses for Taxation Department officials to come review your books.
You should be advised that regardless what fiscal year start date you have chosen for your firm’s accounting, you will need to keep a separate set of books that uses July 1 as the fiscal year start date in order to complete your commerce tax filing. Even if you think this burden will not affect you because your total gross receipts do not exceed $4 million, please be aware that you will have to complete a state tax return to show that you do not owe any money, and completing the return could entail steep accounting costs on its own
If you have a controlling interest (at least 50 percent ownership) in multiple business entities, these entities will be grouped together as an “affiliated group” for purposes of the tax. If, for instance, you have majority ownership in five companies all with gross receipts of $2 million (below the tax threshold) these companies would be grouped together to form $10 million in gross receipts and you would be assessed the tax on the $6 million in revenues beyond the $4 million threshold. You may want to advise any partners you may have who could be adversely affected by this change.
If you are thinking that $4 million is a high threshold that your business does not or will not meet, please note that we are more than confident that this threshold to be dramatically lowered since every indicator shows that the legislature has grossly underestimated how much revenue these taxes will bring in.
Business License Fee: For all corporations, the annual assessment for the state business license fee will increase to $500. This is more than double the current “temporary increase” rate of $200 that you have been paying and five times the $100 rate that existed prior to 2010. For all other business entities besides corporations, the annual business license fee will remain $200.
Annual Filing Fee with Secretary of State: Each year, every business in Nevada is required to update the Secretary of State with its list of officers and directors, managers, etc. This fee varies by entity type, but will increase by $25 for every entity type. If you are currently paying $125, your new rate will be $150.
Modified Business Tax: In 2003, the Nevada Legislature created an excise tax on all private-sector payroll in Nevada at a rate of 0.67 percent. That rate was raised to 1.17 percent on a temporary basis in 2009. It has now been raised again on a permanent basis to 1.475 percent with an exemption for the first $50,000 in quarterly payroll. For all mining companies and financial institutions, the rate is 2.0 percent. However, firms can now deduct 50 percent of the amount paid in commerce tax from their MBT liability.
Sales and Use Tax: In 2009, the Nevada Legislature raised the statewide sales and use tax by 0.35 percent on a temporary basis. That change has now been made permanent.
Other Taxes: The cigarette tax was raised from 80 cents per pack to $1.80 per pack and requirements for the pre-payment of certain mining taxes were extended along with the suspension of certain allowable deductions from mining taxes.
These are the kind of issues where every business owner, no matter how small or how large your business is, needs an advocate in Carson City. I am looking forward to being your advocate. In the meantime, if you have a concern and would like to contact me, email me at email@example.com.